2004 (1) TMI 296 - AT - Income Tax

Tribunal Invalidates Reassessment Due to Insufficient Evidence; Dismisses Revenue Appeal & Upholds Cross-Objection.

The Tribunal quashed the reassessment proceedings for M/s. Assam Tea Co. and M/s. Ashoka Industries, finding the reassessment invalid due to insufficient ... Income Escaping Assessment - Validity of reassessment proceedings initiated by the Assessing Officer and confirmed by the CIT(A) - Genuineness of cash credits introduced by the assessee - Whether the reassessment proceedings initiated by the Assessing Officer and confirmed in the first appeal were valid or not - HELD THAT:- It is immaterial that the Assessing Officer at the time of making original assessment could have found on further inquiry or investigation that the transaction was genuine or not. This is the mandate of the decision of the Hon'ble Apex Court in the case of Phool Chand Bajrang Lal v. ITO [1993 (7) TMI 1 - SUPREME COURT]. This leads us to an irresistible conclusion that there are no fetters on the power of the Assessing Officer to initiate reassessment proceedings in respect of transaction which was examined by him at the time of original assessment, if the subsequent events lead him to believe that any income chargeable to tax has escaped assessment by reason of non-disclosure or wrong disclosure of the primary facts at the assessment stage. Unfortunately the steps of converting suspicion into belief about the escapement of income in the instant cases, were completely lost sight of. Except for the statement of Smt. Savitri Devi, denying her involvement in any genuine loan transactions, there is no material with the Department to justify the initiation of the reassessment proceedings in the cases under scrutiny, which in our considered opinion is not sufficient to sustain the reassessment for the manifest reason that the credits in the books of these assessees were appearing in the name of M/s. RKPD, in which Smt. Savitri Devi was not a partner. The position would have been otherwise calling for further examination at our end if the credit entries had been appearing in her own name. A minimum that was required was to record the statement of Sh. Parshotam Dass during the course of his assessment proceedings or in the cases of these assessees if he was not available during the course of search on 31-1-1989. Thus, we are not persuaded to uphold the initiation of the reassessment proceedings, which are hereby quashed. We, therefore, answer first question in negative. In view of our answer to question No. 1, the second question becomes academic only. M/s. Ashoka Industries, the appellant in three years has also challenged the levy of interest under sections 139(8) and 215 in the reassessment proceedings. As the proceedings and the consequential assessment u/s148 are annulled, there cannot be any question of charging interest under these sections. In the result, the appeal(s) of M/s. Assam Tea Co. and those of M/s. Ashoka Industries are hereby allowed. Genuineness of cash credits - In the absence of any material worth the name showing any connection of these two concerns with Sh. Parshotam Dass, it could not have been said that they were also name-lenders. It is further noted that when the Assessing Officer completed reassessment u/s 143(3), read with section 148, no addition was made in respect of credits appearing in the names of these two concerns. Only an addition of Rs. 36,112 pertaining to M/s. RKPD was made which goes to show that the transactions with the other two concerns were found to be genuine in the eyes of the department. In our considered opinion, the learned Dy. CIT(A) rightly appreciated the facts in coming to the conclusion that that amounts in relation to the other two creditors could not have been considered while applying the provisions of section 149(1)(a). Thus, we have quashed the initiation of the reassessment proceedings in other cases discussed supra. The reasons stated therein would fully apply to this case as well. We accordingly uphold the impugned order on a different score. The Cross-Objection of the assessee, being in support of the impugned order is hereby allowed. The alternative prayer for deletion of addition on merits has become infructuous in the light of our setting aside the very initiation of reassessment proceedings. In the result the assessee succeeds and the appeal of the Revenue stands dismissed. Issues Involved:1. Validity of reassessment proceedings initiated by the Assessing Officer and confirmed by the CIT(A).2. Genuineness of cash credits introduced by the assessee(s).Summary:Issue 1: Validity of Reassessment ProceedingsThe primary question was whether the reassessment proceedings initiated by the Assessing Officer and confirmed in the first appeal were valid. The Tribunal examined the conditions u/s 147(a) of the Income-tax Act, 1961, which require the Assessing Officer to have 'reason to believe' that income chargeable to tax has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The Tribunal noted that the reassessment was based on information from a search at the premises of Sh. Parshotam Dass, who was alleged to be a name-lender. However, no statement from Sh. Parshotam Dass was recorded, and the only evidence was the statement of his wife, Smt. Savitri Devi, which did not directly implicate the assessee. The Tribunal concluded that mere suspicion, without concrete evidence, could not justify reassessment. Consequently, the reassessment proceedings were quashed.Issue 2: Genuineness of Cash CreditsGiven the Tribunal's decision on the first issue, the question of the genuineness of the cash credits became academic. The Tribunal did not need to address this issue further as the reassessment proceedings themselves were invalidated.Additional Points:- M/s. Ashoka Industries: The Tribunal also annulled the reassessment proceedings for M/s. Ashoka Industries and held that no interest u/s 139(8) and 215 could be charged as the reassessment was invalid.- M/s. Bant Ram & Co.: The Tribunal upheld the decision of the DCIT(A) that the notice u/s 148 was barred by time limitation. The Tribunal found that the Assessing Officer wrongly included unrelated transactions to meet the threshold for reassessment. The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, making the alternative prayer for deletion of addition on merits infructuous.Conclusion:The appeals of M/s. Assam Tea Co. and M/s. Ashoka Industries were allowed, and the reassessment proceedings were quashed. The Revenue's appeal in the case of M/s. Bant Ram & Co. was dismissed, and the assessee's cross-objection was allowed.